2008 (8) TMI 901 - SC - Indian Laws

Contract Disputes: Exhaust ADR Before Writ Court

Pimpri Chinchwad Municipal Corporation And Ors. Versus M/s Gayatri Construction Company and Anr.

The Supreme Court held that the writ petition was not maintainable in contractual matters and emphasized the need to exhaust alternative dispute ... Whether the forfeiture of security deposit is without authority of law and without any binding contract between the parties and also contrary to Section 5 of the Contract Act? Whether the writ petition is maintainable in a claim arising out of a breach of contract? Issues Involved:1. Maintainability of the writ petition under Article 226 of the Constitution of India in contractual matters.2. Existence and applicability of an alternative remedy through in-house mechanisms.3. Alleged breach of contract and the subsequent actions taken by the Corporation.Issue-wise Detailed Analysis:1. Maintainability of the Writ Petition:The primary issue in this case was whether the writ petition filed by the respondents was maintainable under Article 226 of the Constitution of India. The appellants argued that the writ petition was not maintainable because the matter pertained to a contractual dispute, which should be resolved through civil law remedies rather than a writ petition. The Supreme Court referred to several precedents, including *National Highways Authority of India v. Ganga Enterprises* (2003 (7) SCC 410), where it was held that disputes relating to contracts cannot be agitated under Article 226. The Court reiterated that the proper forum for contractual disputes is either arbitration or civil court, and not a writ court.2. Existence and Applicability of Alternative Remedy:The appellants contended that Clause 58 of the contract provided an in-house mechanism for dispute resolution, which the respondents should have utilized instead of filing a writ petition. Clause 58 stipulated that all disputes arising from the contract should be referred to and settled by the City Engineer, with further recourse to a committee if the contractor was dissatisfied with the City Engineer's decision. The Supreme Court emphasized the importance of exhausting alternative remedies before approaching a writ court, as highlighted in *Kerala State Electricity Board v. Kurien E. Kalathil* (2000 (6) SCC 293).3. Alleged Breach of Contract and Subsequent Actions:The respondents claimed that the Corporation was at fault for not providing the necessary infrastructure to carry out the contractual obligations, leading to the delay in completing the work. They argued that the Corporation's decision to invite fresh tenders and terminate the contract was done without following the principles of natural justice. The High Court had initially found merit in the respondents' claims and directed the Corporation to maintain the status quo. However, the Supreme Court noted that the High Court had not adequately considered the objections regarding the maintainability of the writ petition and the existence of an alternative remedy.Conclusion:The Supreme Court set aside the High Court's order, emphasizing that the writ petition was not maintainable in contractual matters and that the respondents should have utilized the in-house dispute resolution mechanism provided in the contract. The Court also noted that since the High Court's order was stayed and fresh tenders were called for, a considerable portion of the work had already been completed. The appeal was allowed, and the writ petition was dismissed, with the respondents being advised to seek remedies available in law if they so desired.